TMI Blog2020 (2) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, we do not go into the said issue whether any services were rendered by the agent or not. As regards the advertisement payment, the assessee has made payment to two different media entities namely Argus Media Limited, London, U.K. and Arab Fertilizers Association, Cairo Egypt, therefore, the issue of existence of PE of the recipient can be considered only when there is a DTAA between the India and the countries of the recipient non-resident entities. The registration fee and foreign exhibition participation fee was paid to Arab Fertilizers Association, Egypt, therefore, in order to consider benefit of DTAA and existence or non-existence of PE, the provisions of the respect DTAA are required to be considered. Since neither the A.O. nor the ld. CIT(A) have examined this issue by considering the relevant facts as well as the respective DTAAs if any between the India and the country of the recipient/non-resident, therefore, in our considered opinion, this issue requires a proper verification and examination. Accordingly, we set aside this issue to the record of the ld. CIT(A) for adjudication of the same afresh - Appeal of the assessee is allowed for statistical purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and registration fee, the assessee contended that the payment was made towards advertisement in AFA Magazine Arab Fertilizers . This payment was made outside India for advertisement of assessee s product in the foreign country. The recipient has no PE in India and therefore, the said payment is not taxable in India in the hands of recipient/non-resident. Thus, the assessee contended before the A.O. that the services were rendered outside India and the recipients in absence of PE in India are not taxable in India and consequently no TDS is required to be deducted U/s 195 of the Act. Further the commission was paid to non-resident, therefore, the provisions of Section 194H of the Act are not applicable in the case of assessee. The A.O. did not accept this contention and explanation of the assessee and held that the payment made by the assessee to non-resident are in the nature of fee for technical services as defined in Section 9(1)(vii) of the Act being the payment made for managerial acumen and expertise of non-resident, therefore, the nomenclature of payment being commission is not relevant in the opinion of the A.O.. Thus, the A.O. held that the payment is in the nature of fee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e towards foreign booth, sponsorship fee, foreign exhibition participation fee and advertisement expenses, since the recipients have no PE in India, therefore, the said payment was not taxable and chargeable to tax in India in the hand of the recipient and consequently no TDS was required to be deducted. Thus, the ld AR has submitted that the ld. CIT(A) has wrongly applied explanation to Section 195 of the Act ignoring the fact that the payments made to non-resident are not chargeable to tax in India. 7. On the other hand, the ld DR has submitted that the A.O. has given a finding that the payment made by the assessee are in the nature of fee for technical services and therefore, as per the provisions of Section 9(1)(vii) of the Act, the said payment is chargeable to tax in India and consequently the assessee was under obligation to deduct tax at source failing which the said payment is not allowable as deduction as per the provisions of Section 40(a)(i) of the Act. Thus, the ld DR has submitted that once the payment in question is held to be fee for technical services, then the same is liable for TDS. He has relied upon the orders of the authorities below. 8. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of making or earning any income from any source in India : Explanation [2].-For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries .] As noted above, Section 9(1)(vii) would classify and cover all incomes as accruing and arising in India which partake the character of payment on account of fee for technical services , which in turn, has been defined to include any payment for rendering of any managerial or consultancy services rendered by the non-resident agent. In the instant case, since the assessee was not able to sell his goods on his own offshore, he has to engage the managerial acumen and expertise of the non-resident in lieu of a consideration, termed as Commission . This is to say that the payment by the resident assessee in conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 4.3. as under: 5.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the AO after discussing the provisions of Section 195, including the Explanation 2, has concluded that the appellant was required to deduct the tax at source while making the payment of above referred expenses even, to the non-resident persons, whether or not the non-resident person had a residence or place of business or business connection in India or any other presence in any manner whatsoever in India. The Explanation 2 has been inserted by the Finance Act of 2012 with retrospective effect from 01.04.1962. I am of the considered view that the argument of the appellant that since the nonresident persons whom the payments were made did not have place of business or business connection in India, therefore, the appellant was not required to deduct tax at source on the above referred payments, is not correct. Regarding the second argument of the appellant that the income of the recipients of the above referred expenses was not sum chargeable under the provisions of Income Tax Act, 1961 therefore the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement contains the terms and conditions as well as respective obligations and duties of the parties to be performed in respect of sale of produce of the assessee in the Jordan as well as neighboring country. Neither the A.O. nor the ld. CIT(A) has examined the actual nature of services rendered by the agent so as to bring them to the ambit of the fee for technical services. We further note that the assessee has made payment of commission in respect of sale to one party namely Indo-Jordan Chemical Limited, Jordan. This fact is relevant to consider the nature of services rendered by the foreign agent when the assessee has made sales only to one party. Even it is not clear from the record produced before us whether the sale made to the Indo-Jordan Chemical Limited, Jordan was an international transaction being sold to associated enterprises (AE) or not. Since the A.O. has not taken up this issue and even held that the agent has rendered the services which is in the nature of managerial acumen and expertise and consequently payment is in the nature of fee for technical services, therefore, we do not go into the said issue whether any services were rendered by the agent or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
